>> this is "the chris matthews show." >> ask not what your country can do for you. >> tear down this wall. >> i can hear you. >> a time for change has come. chris: all i want for christmas. what does president obama need to call the debt deal a victory? raise the tax rate for the rich? that's at the top of the list but besides this and getting a deal done on time, what would really stuff the president's stocking, giving him a fresh start for his second term. shopping days, what would it take to make everyone happy or equally unhappy? a cut in government spending, a squeeze on medicare and medicaid. anything else? and finally hillary, clintons, both of them, global figures

abroad, political superstars at home. to become in the four years, does she just have to wait? would anyone challenge her for the prize? could a hot new republican give her trouble, or cause her not to run? i'm chris matthews, welcome to the show. with us today, john harris, kelly o'donnell, michelle caruso-cabrera and david ignatius with "the washington post." first up, will president obama convince republicans to give him a compromise that's big enough, sweeping enough to end this month on a high note? to cap off his election win and get a clean start on his second term. a victory for the president would look like this -- get that top income tax rate up. make minimal concessions on entitlement cuts and get it done before the end of this month, avoid that cliff. this week the president said talk on a partial deal on taxes alone will not cut it with him. >> there have been reports that perhaps the republicans go ahead and let the middle class tax cuts get extended, the upper income tax cuts go up, otherwise

we don't get a deal and next year we come back. i have to just tell you, that's -- that is a bad strategy for america. it's a bad strategy for your businesses, and it is not a game that i will play. chris: he wants a pretty good deal, a lot of things in it. when he sits down in that room with he and boehner, it's come down to the two of them, are both looking at the fact that obama won the election and he should get a tilt in his discretion, a 60-40 deal? >> i think boehner is a realist and when he said things like bahama care is the law of the land and backtracked a little, that's a signal. he's saying let's jump off the boat together, not the cliff, the boat. it's about legacy for both of them. chris: the president seems to insist on a rate hike for the top bracket, something close from 35 to 39.6. does he need something more in

terms of taxing the rich, like getting rid of deductions for mortgage, charity, state, local? >> he's already got in his package which totals $1.6 trillion, an additional closing loopholes, capping deductions, so yes, he does need more. the president's in a very interesting position. he's got the high ground. he has narrowed the focus. he's got john boehner has his intermediary, his contact. i'm told that white house officials have been talking almost constantly with boehner's people in a very specific discussion about the details of the package so i think he's thinking big about a package he can take to the country and say we have begun to change the mess in washington. chris: welcome to the show, michelle. first i wonder, what does wall want? i assume they want a deal. have they baked into the cake --

when i read the dow every day, am i looking at smart people on the street who believe there will be a deal by the 31st of this month? >> a lot of people have mixed views about what's going to happen and it drives decision making. chris: what's the majority of thinking on the street. >> i'd say it's 50/50 and when they're hopeful about a deal, the dow moves higher. when harry reid says something negative, it goes down. chris: do they want a rate hike on the rich or do they like the deductions route more? >> they like the deductions route more for sure. they want a substantive deal. they would like to see the credit rating of the united states raised. chris: it's more important than the how, the fact that there is a deal. >> they absolutely want a deal but also like the cleaner tax code, these guys file tax that is look like war and peace, some have to put their taxes on dollies to file. they need a cleaner tax code. chris: how much of a price does the president have to get out of the rich in terms of increasing

the rate and getting rid of deductions so he can take it back to pelosi and the liberal core of the democratic party and say i got enough? >> he needs rates to go up absolutely. he cares that much about pelosi. i think he rightly considers himself in the dominant position. chris: with the house of representatives? >> as a newly re-elected democratic president, he doesn't have to worry about pelosi the way boehner needs to worry about his caucus. beneath the exterior of confrontation and brinksmanship we are seeing in the public sense, privately, there's good lines of communication, both boehner and obama want the same thing, a deal, and they've done this in 2011 so they know what each other's positions are, what they can put up with and what they want and that's why i think we will see obama soon move in boehner's direction, after another week or so of brinksmanship, we will see obama say, hey, look, i'm coming forward with entitlement cuts that i'm willing to propose publicly.

chris: i got to check this. would you confirm that? you know these people. >> all of the components of the deal are there. when people ask me why did conditioning leave town? because the people who matter in the deal stayed in town. all the various members of congress could go home, it gets them out of the way and deal talking can go on. the brinksmanship is political theater and necessary in the process. chris: both pretend they're willing to go over? >> to both show resistance and then incrementally get towards -- chris: you covered the greek situation and watched the hell that went on over there. give me a picture of that and where we're headed if we don't deal in the short run with the debt problem and the cliff and later on, what do we face in this country? >> greece is a perfect example when you continue to borrow from the future, which is what we're doing right now. so if you don't deal with entitlement reform now, if you don't say to people under 50, things are going to be different, what happens is you get to the point where you're in greece and you tell an

85-year-old, you used to get $150 euros a month and now you're not. chris: the medicine is the cure. >> the comparisons between the united states and greece which republicans like to make are so wildly -- chris: what is the apt comparison if this country doesn't get its act together? >> the united states really is unique. we are still the world's store -- chris: can we bank on the fact that we're the currency of the world and we can keep running enormous deficits? >> we have the ability to issue debt in our own currency and make it credibility. nobody else can do that and people keep buying it. two more quick points, chris, about this what we are seeing now. first, the president has taken leadership of his own party, something he really didn't do during his first term and right out of the box after the election he's the leader of the democrats. don't deal with pelosi, don't deal with reid, i'm the guy, and that's significant and the second thing is in that clip that we saw introducing the

saw the president talking to business groups and really trying to bond with them and say i want what you want. chris: they're his allies. >> two new things about this president, post-election, that's fascinating. chris: even though you disagree about the urgency with this thing, the fact that the business community are his natural allies because they want it done. the democrats haven't been heard from because the focus has been on the tax side. when it comes to their turn and the president looks to pelosi and steny hoyer, are they going to deliver a serious change in entitlement programs? >> they're going to have to because the president is the leader of his party and there's an interesting point. boehner authentically doesn't want higher rates. it's a genuine concession by him and by republicans. obama, i think, on truth serum, would agree that significant entitlement reform is something that's necessary, it's something he wants so his concession is actually taking him closer to where he thinks the country

needs to be substantively. that is not true of house democrats but with obama, i believe, substantively. chris: i wish you could tell me quickly, why does boehner care so much about the top bracket and the rate? >> because he's authentically a conservative and believes that rates -- higher rates just mean a green light for democrats to expand the role of government. chris: republicans suspect that all democrats want is a larger to spend more money. >> to spend more money and they believe it hinders growth if you have a higher tax rate but you'll see democrats pop up with other issues -- concern about extending unemployment benefits for those out of work the longest which is expensive for the government as well as family farms and the estate tax is popping up again. chris: let's look at how big a deal we will look at. we put it to our matthews meter. does it look like the eventual deal will be a grand bargain to put the debt issue to bed or something short of that.

it's unanimous, everybody there said it's the second choice, not a grand bargain. kelly, are you surprised? we're still going to be talking about debt in years to come. >> what is achievable in the moment and the grand bargain which is the desire of both the president, boehner, and a lot of people, is a harder reach. for what's achievable is something less than that. chris: will the president be able to start this year with his second inaugural address, his state of the union for 2013, will he be able to start with a clean table and talk about the future, the things he wants to talk about after we're through this mess. >> i think it's essential to his presidency that the answer to that be yes. really, this is the unfinished business of his first term, chris. we haven't heard anything about -- chris: so ideally we will get to that. >> those speeches are data points that live in history that are important to the president and most people are talking about the quarter or the end of the year so i think he's got to have that. chris: will it be a forward-looking opportunity for him? >> yes and he'll be able to look

forward. >> he wants to say to the country, we are making a fresh start. these divisive political issues of the last four years are ending and that's why i think there may be something closer to a grand bargain. chris: all he has to worry about is iran after this is over with. >> you got it. he's got the biggest, most dangerous foreign policy issues coming at him right away. chris: keep the iranians from going weaponized. all this fiscal cliff talk reminds us of cliffhangers in the movies but which cliff scene will washington's dare devil act look like? could we see both sides leap to safety at the last minute like paul newman and robert redford in butch cassidy or could it be more like rebels without a cause drag racing toward a danger they don't appreciate until it's too late.

[screaming] there are other movies where going over the cliff is a planned thing like it was for bill murray's desperate character trying to end his recurring nightmare in "groundhog day." >> we musn't keep it waiting. >> he might be ok. chris: the worst movie analogy we could imagine ends badly for all concerned. let's hope and pray that thelma and louise are not boehner and obama. my own favorite clip is mount rushmore, "north by northwest," the hitchcock great with cary grant pursued by spies.

the survival is never in doubt. not sure if that's true now. when we return, the hillary clinton for 2016 talk is ready to roar. scoops and predictions.

chris: we just re-elected barack obama but the hillary for president talk is getting loud. last week she spoke at a washington think tank and here's a part of her introduction that night. she has taken her life experience in politics as a mother, as a senator, and put that all together in the pinnacle up to now of her public service which is endeared her to millions and millions of people all over the world. ♪ girl you're amazing just the way you are ♪

>> the best is yet to come. chris: you can't top that, can you, but add a new abc "the washington post" poll showing that 60% of the country supports hillary for president, across both parties, men and women. contrast that with eight years ago, before she ran last time and before she was secretary of state, it was just 38% saying, go hillary. john, you wrote the book "survivor" about her husband, bill. you know the clintons, is there doubt or no doubt she's running for president? >> there's not in my mind much doubt. zero doubt in bill clinton's mind as to what he wants. he desperately wants her to do it. chris: you notice what he did in pennsylvania this time, knocked off people that opposed her in the past and helped people that have been with her. >> he is organizing his public life around keeping options open for her. hillary clinton would say, look,

i'm exhausted, give me a year to get my life back in order to think about it but i think at every turn in hillary clinton's public life when she's had an option to do something more ambitious, she's chosen that option so to my mind there's not a lot of doubt. chris: let me ask you about the think we alle i agree she'll be encouraged to run. seems to me that other people like vice president biden and governor of new york, they have to get going and make their move. the secretary of state gets to relax, get her head clear, read a novel or two, think about something other than work. how long does she have? >> lining up important fundraisers and clearing the field if that can be done, maximum, a year, and that would give her enough time to rest, regroup, decide, does she want to go through it because if you're going to do it the second time, you gotta win. she went through the hardest thing and has a place in history now. you can't come in second a second time.

it would be tough. when you talk about new york, she's from new york. if you talk about biden, president clinton eclipsed the vice president on the trail this time so they have built-in buffers around those figures. chris: 12-year commitment, runs for four years, serves for eight, big decision. >> she'll be in her late 60's. i saw her make the speech -- to a gathering of americans and israelis and it was the best speech i've ever seen her give because she did something that bill clinton knows how to do and very few other politicians do which is to establish in a room of hundreds of people a sense of intimacy with each listener. it was a speech mainly from a teleprompter but it was so and passionate and i turned to the person next to me, i said, we just heard the first campaign speech of the 2016 campaign. chris: money? >> understand, i have a conflict

of interest. i went to wellesley, she went to wellesley. i want the first woman president to have gone to wellesley. think it's a great president because it's not since eisenhower has there been a candidate so up-front favored without any doubt. >> the ability to freeze -- chris: who in the party would have the nerve to really try to beat her? >> i think there would be ways to take her on from the sides over the next year or two to establish a profile. i'm not even talking about 2016 but establish a profile. but head-to-head is going to be really difficult. chris: i want hillary clinton versus chris christie. a joyful occasion for us all. when we return, scoops and predictions.

chris: john, tell me something i don't know. >> big pressure from top republicans on south carolina governor nikki haley to anoint representative tim scott, an african-american, to the senate. they want her to help the party salvage demographic problems. chris: does she want the seat? >> i haven't heard that but if not, they want him to have it. >> i want to talk south carolina, too. she says she will not take the seat and i think what's interesting is getting beyond the demint replacement, who in the senate who remains will be the tea party front runner and look at mike lee of utah who's not had as great a profile

filling the demint void. chris: he was the forerunner to the opposition to the handicap measure. >> federal reserve will keep helping with the economy because of the fiscal cliff situation denting consumer confidence and business confidence so you really need ben bernanke in there. on friday.t news >> unemployment report was better than expected but needs to be better than that. >> buzz in washington about whether susan rice or john kerry will be the next secretary of state and i'm told the president hasn't made up his mind yet and may not make up his mind until january. he wants to get the fiscal cliff business done with so don't be in a rush to await that decision. chris: when we return, the the week, will barack obama's scores in the second term be on foreign policy or here at home?

chris: welcome back. syria, egypt and afghanistan are just the foreign policy challenges we already know about russia out china and there which brings us to the big

question this week -- will the president's second term triumphs be abroad or here at home? >> i think his second term will be defined by foreign policy and looming confrontation over iran. chris: politco has spoken. >> despite all of the domestic issues, he will have a bigger role to play on the world stage and brought into that with events whether it be syria, iran. >> leadership just changed in china for the first time in 10 years, the most important economic relationship we have in the world and he's got to make headway there to make sure they stay on their reform path so they continue to grow and the world economy will be stronger. >> i agree, it's unanimous, the big foreign policy challenges are coming at him. he can't avoid them. he's got to deal with iran, he's got to deal with syria, he's got to deal with afghanistan. chris: do we have a chance with iran? everybody worries about this -- do we have a chance to stop them from nuclear weaponnizing? >> yes, the elements of the

deal, what's called the ugly deal to save face for both sides adequately, is already clear and allows iran some enrichment but caps the enrichment at a level that would not present a threat to build a bomb. chris: thanks for the great roundtable. john harris, kelly o'donnell, michelle caruso-cabrera and david ignatius. that's the show. thanks for watching. hanukkah is here and santa claus is coming to town. jack kennedy, elusive hero, makes a great gift for history lover. we'll see you next week. [captioning made possible by nbc universal]